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Report: Workers' Share Of Corporate Income Down $535 Billion Since 2000

U.S. workers have seen their share of corporate income for compensation drop from 82 percent to 75 percent since 2000, shows a recent analysis by the Economic Policy Institute (EPI).

A 7-point decrease "might not seem like a lot, but if labor's share had not fallen this much, employees in the corporate sector would have $535 billion more in their paychecks today," EPI's research and policy director Josh Bivens said in a paper on the findings.

That money would work out to be a $3,770 raise for each U.S. worker if all working Americans, not just those employed in the corporate sector, got a slice of the pie.

From 2000 to 2014, total productivity grew by 21.6 percent, EPI researchers found. Over that time period, however, inflation-adjusted compensation for the median worker increased only 1.8 percent.

The disparity between productivity growth and pay for the typical U.S. worker has been a key factor behind rising income inequality, according to EPI experts.

One of three major "wedges" driving that productivity-pay gap is the loss of labor's share of income to capital owners, the report says.

"The fact of the matter is, for decades, a typical worker's pay rose alongside productivity--but since the 1970s, a hugely disproportionate share of income generated by rising productivity has gone to extraordinarily highly paid managers and owners of capital," said report co-author and EPI President Lawrence Mishel. "The relationship between rising productivity and worker pay has broken down because workers' bargaining power has been intentionally hamstrung by a series of intentional policy decisions, made on behalf of those with the most income, wealth and power."

As Mishel noted, EPI's research shows that the gap between productivity and worker pay has been a problem since the 1970s.

From 1948 to 1973, productivity and hourly compensation increased at about the same pace. Between 1973 to 2014, however, productivity grew 72.2 percent, while the average hourly compensation for workers rose only 9.2 percent, the report shows.

"Our problem is not a lack of growth. For the past 40 years, productivity has gone up substantially, but these gains have not reached working people," Mishel explained. "The problem is that wages have been suppressed by a restructuring of rules on behalf of those with wealth and power."

Other key factors contributing to the productivity-pay disparity, according to EPI experts, include "growing inequality of compensation" and "worsening terms of trade, in which the prices of things [workers] buy (i.e., consumer goods and services) have risen faster than the prices of items they produce (consumer goods but also capital goods)."

EPI is a proponent of policies to boost wage growth, including increasing the minimum wage, strengthening workers' ability to unionize and revamping overtime protections, among others.

"If we are going to break the upward spiral of inequality and end the stagnation of hourly wages, we need to relink productivity growth to the pay of typical American workers," Bivens stressed. "We need a policy platform that explicitly seeks to re-establish this connection, by strengthening workers' bargaining power vis-a-vis their employers."

But the American Action Forum (AAF), a right-leaning think tank, takes issue with EPI's research on productivity and worker compensation, saying the findings are based on "analytical flaws, such as comparing labor productivity of the entire economy to compensation for private sector production and nonsupervisory workers."

In its own report on the issue, AAF claims that "actual labor productivity and compensation" have increased at roughly the same rate since 1964.

"When the private-sector growth of productivity and total compensation are compared using all private sector workers and the same output price deflator, it is apparent that compensation and productivity have grown hand in hand," AAF's report reads. "As a result, the assertion that regular workers do not benefit from economic growth is based on a faulty analysis that essentially underestimates the growth in real hourly compensation during the last half century. Most troubling, these assertions inspire misguided policies, such as raising the minimum wage or expanding overtime pay, which have been shown to provide minimal benefit to those in need and often hurt the workers and families the policies aim to help."